Dec 17, 2012

Progress On Fiscal Cliff Negotiations And Social Security May Be Greatly Affected

There is progress in the fiscal cliff negotiations. If the reports are accurate, Social Security will be greatly affected. Ezra Klein (who is about as well plugged into the Obama Administration as it is possible for an outsider to be) reports that the deal would include:

A shift to the chained CPI method of computing Social Security's Cost of Living Adjustment (COLA). The chained CPI method is a sneaky way of cutting Social Security benefits. Few people understand it but it reduces the COLA. Its effects on a Social Security recipient compound as the years pass.

An end for the sequester, which would dramatically cut operating budgets for Social Security and all other agencies on January 1 if it takes effect but there would be another sequester-like device to take effect at some later date.

There might be "some amount of infrastructure spending" in the deal. Klein does not say how this spending might be directed. The Social Security Administration would be a great place for this spending. The money could be spent quickly and to great effect, both in terms of backlogs at Social Security and program integrity.

The 2% reduction in the F.I.C.A. tax would end.

A Washington Post article says that the infrastructure spending could be $50 billion! I would be extremely disappointed if Social Security were not included in infrastructure spending that high.

The article relates that"[S]enior Democratic aides said they could probably muster the votes
for the [chained CPI] change if it was not applied to disability payments, known as
SSI, and if very old seniors were protected through a bump-up in
benefits at age 85." I hope this is just confused, that the chained CPI would not be applied to Title II Social Security disability benefits as well as SSI disability benefits. This would make sense because applying the chained CPI to someone who would draw disability benefits and then retirement benefits for 50 years or more would be devastating because of the compounding effect.